How To Play A Debt Default: Buy Oil

How To Play A Debt Default: Buy Oil

Can they avoid the federal debt default? (Photo by Drew Angerer/Getty Images) Senator Chuck Schumer said Monday that Congress needed to hike the federal debt ceiling "by the end of this week" in order to stave off defaulting on our national obligations. October 18 is the official deadline for positive action by the Congress and President. No doubt, failure to do so would be a snafu of historic proportions — paychecks would stop for government workers (and politicians), Social Security checks wouldn't show up, funding for Homeland Security would vanish, and the foundations of the entire global financial system would be shaken. While a debt default for the U. S. in modern times would be unprecedented, you can hedge your own exposure, somewhat, by learning from the example of other nations' defaults, and following the standard playbook. The hedge fund sharpies who believe in a non-zero chance of U. S. default are buying portfolio insurance such as put options on dollars and call options on other currencies and dollar-denominated commodities. You can too. But the more tangible hedges worth buying. If a default happened it would collapse the value of the dollar as investors fled to the safety of more